Grim
Jesus didn’t get a band of armed men to take the money-lenders’ money by violence or threats, give it to himself and his favourites to spend on anything they like, and claim a higher moral and social justification, did he?

It is utter moral confusion and vanity to think that the golden rule provides any justification for socialism.

Democracy adds nothing to government but majority opinion. Yet if a majority vote for slavery or rape, you don’t think that’s okay, do you? What puts robbery or fraud in any better position?

Bugsy
Governments have a perpetual interest in inflation for a number of reasons, and virtually all their interventions in money and banking serve to permit and encourage inflation. This in turn causes the so-called business or trade cycle. (Interventionism cycle would be a better name.)

Government is behind the 19th century depressions you mention, by permitting banks to refuse redemption of their receipts, in other words, licence for theft. Government borrowed from banks to fund war with England in 1812. The banks printed new paper money. People withdrew their gold. So government stole it – granting banks the privilege of refusing payment. This in turn stimulated inflation and ‘wildcat banking’ which went on throughout the 19th century as banks realized they need have no fear of bankruptcy after an inflation. Both government and the banks profited from ripping off everyone else, as today, please see http://mises.org/money.asp

The problem with assigning to government the power to regulate money is the same as with anything. How are they, in their offices, to know what to do? They are human beings like everyone else, and simply do not and cannot know what they would need to know. The economic chaos of socialism *must necessarily follow* because, absent the price mechanism which they are deliberately setting out to displace, they have no means of economic calculation.

Fozz
Fiat money is always imposed by force and always takes over from, or hijacks, a pre-existing commodity money. (It cannot exist ab initio because the government would need to stipulate the price structure of everything

on day one which is impossible.)

If the government monopoly is abolished, society immediately reverts to its preferred underlying commodity or commodities.

Fiat money states have killed more people in a century than in all previous centuries in history, but that is not the point. It is not the use of this or that as a medium of exchange that is responsible for deaths, it is killing people, for which the killers have and must always have the responsibility.

When governments print or permit money substitutes above the level of money in specie, or when they print fiat money out of all proportion to the commodity money it parasitizes, they *are* forcibly seizing the wealth of others. They are not creating real wealth out of thin air as they pretend. The value of the extra paper money comes from diluting the value of the existing stock of money at the time of printing, that is all. They are thieving. Their actions are based on their claim of a legal monopoly, which only works because it is backed up by police, prisons, weaponry – in short, violence or the threat of violence. And majority opinion is no justification for robbery.

Where gold is dug up is irrelevant any more than it matters where wheat is grown. People can simply trade it in exchange for other valuable goods and services. Nor need gold be the only legitimate medium of exchange. Money and banking should be free, resting on nothing but the contracts of the parties, and the law against fraud.

The idea that the government needs to, or even can, manage the supply of money is based on fallacy. If it were true, total government control of the economy would work.

Far from protecting us against force and fraud, fiat money consists of nothing else – on a massive and unprecedented scale.

The gold standard, far from being impossible, is eminently practical and just, awaiting only the understanding of people brainwashed to believe chaotic interventionism is necessary or desirable.

Mises lived through the early 20th century. He witnessed the rise of communism in Russia, Nazism in Germany and Fascism in Italy. In 1940, he fled Europe, and arrived in New York.
Is it any wonder he was terrified of the threat of totalitarianism?
Not since the public forums of ancient Greece, have the people had the ability to monitor the workings of Government that we have today.
I suggest, Jefferson, every time time you use the word 'Government', have your word processor replace it with 'the people'.
Currently, Government issued cash represents about 3% of all money in circulation. The other 97% is created when a person, business or government walks into a bank and says "if you give me money today, I will pay back MORE than I borrowed".
Why do the blindly faithful followers of Mises continue to blame the 3%, and ignore the 97%?
Roughly half the cost of just about every item we purchase today, can be attributed to interest.
The reason governments all over the world are frantically propping up banks is because the fastest way to get money into the system is if someone borrows it.

Jefferson,

your argument is not consistent with the facts. Fiat currency does not dilute the existing stock.

It matters very much where the gold is if it is to be used as a medium of exchange. Why would I want anything I don't desperately need from you if trading your widgets for my gold means diminishing my stock of money if I can niether mine it in my own back yard nor produce it as I can with fiat. Why do you think the empires plundered the world for gold? Without it, their growth would eventually run into the limits of the supply of a money which cannot be created, no matter how badly you need it.

Once again, the point you have ignored: if a sovereign nation can create it's own money supply without needing to get it's hands on a rare earth element that exists in limited supply (and is not evenly dispersed over the earth), it is so much the better off. How much gold do you envisage might be left on earth? There are some things we have already run out of.

I think I now understand what a "pamphleteer" is.

Someone with an idea too wacky to justify anything except self-publication.

I'm completely unconvinced that the author understands i) basic economics (even the kind that runs a household on a daily basis), ii) the gold standard (what it was and how it worked) or even iii) how to make a coherent argument.

Even his introduction of the gold standard turns out to be a red herring.

>>Where gold is dug up is irrelevant any more than it matters where wheat is grown. People can simply trade it in exchange for other valuable goods and services. Nor need gold be the only legitimate medium of exchange. Money and banking should be free, resting on nothing but the contracts of the parties, and the law against fraud.<<

This is the basis of a barter system. Nothing wrong with that. Communities existed and thrived for centuries, exchanging goods and services for other goods and services. It may be viewed, through heavily rose-tinted glasses, as a utopian form of cooperation and community.

But it only ever worked in the most basic of societies.

We live in substantially more complex times, and simple systems cannot any longer meet society's needs.

Whether that's a cause for celebration or mourning is a completely different topic.

Hi Fozz, Ive had a look at the RBA site and drew a blank on Discount window levels on Oz, but came across a few things. The RBA has both reduced margins here and extended the duration of these loans . Ditto in the US with the Fed. Discount window figures are available for September/October 08 in the US- from $US19B to$US111B.

Interesting too that last year there were news reports that this is exactly what the CBA was planning to do. I do not know if this went thru or not.

And no I was not saying that banking activities were forcing DW lending and thus the creation of fiat money, although that may be what has effectively happened in the US now. Inter bank lending has decreased and the govt. is stepping into the hole left. The argument is that credit creation, ie private debt which we consumers spent and producers accept as money is more relevant to our situation than fiat money. Debt levels are way beyond money levels and have greatly increased over the last 10 years. Simply saying the debt to income ratio has increased does not explain where the money comes from or account for the compounding quality of the debt.

Agree with you on the effect of the reserve and also the effects of a return to the gold standard.